Five years of negotiations over supplementary pensions end in failure

In late May 1999, negotiations over a new supplementary pensions scheme for white-collar workers collapsed. The talks between the SAF employers' confederation and the PTK trade union bargaining cartel had been going on for five years.

On 27 May 1999, negotiators for the Federation of Salaried Employees in Industry and Services (Privattjänstemannakartellen, PTK) - the bargaining cartel for white-collar workers' unions in the private sector - announced that they could not accept a final offer from the Swedish Employers' Confederation (Svenska arbetsgivareföreningen, SAF) on a new "contribution pension" agreement. This agreement would have replaced the existing agreement on the supplementary pension scheme for salaried employees in industry and services (Industrins och handelns tilläggspensionför tjänstemän,ITP). The negotiations over a new collective agreement on the ITP had been continuing on off for almost five years, since 1994, and they failed because the trade unions could not come to an understanding among themselves. Two of the leading unions within PTK, representing more than half of the 620,000 employees covered by the ITP scheme, refused to accept. The other 26 unions within the cartel decided, after long discussions, to follow this refusal, although they had initially accepted the offer. The dissenting unions were the Union for Technical and Clerical Employees in Industry (Svenska Industritjänstemannaförbundet, SIF) and the Association of Management and Professional Staff (Ledarna).

The reasons the two dissenting trade unions gave were, in short, that the proposed new financial conditions were, according to their calculations, less favourable than those in the existing agreement. For example, the proposed regulations for members born between 1941 and 1971 would mean that these groups would lose money compared with the current system. Another objection was that SAF's proposal implied changes for the worse for part-time workers - many of them women - as well as sick people, parents taking care of sick children, workers on parental leave and others.

A safer pension scheme

SAF, for its part, stated that its proposal would have given employees a "safer" pension scheme, well adapted to the modern labour market and working life. Furthermore, the rejection of the agreement would make the move towards harmonised employment conditions for blue- and white-collar workers more difficult, the employers stated. The latter statement alludes to the fact that an agreement on supplementary pension contributions, similar to the deal rejected in May, was concluded by SAF and the Swedish Trade Union Confederation (Landsorganisationen, LO) in October 1998 (SE9811120F).

The existing ITP collective agreement is still valid and will remain so until a new agreement is reached - which will not happen for a long time, in the estimation of several spokespeople for the trade unions and SAF. The agreement was first signed in 1976 and has been prolonged several times since. The ITP pension scheme provides for a supplementary pension on top of the two statutory pensions. If an employee has been working at least 30 years, 10% of the final salary is paid as ITP. For a white-collar worker who earns more than SEK 23,500 per month, a sum equal to 65% of the earnings over this figure is also paid. For incomes between SEK 60,700 and SEK 91,000 a month, the ITP payment amounts to 32.5% of this part of the employee's total income. On top of the basic ITP provision, there is an ITPK insurance scheme (K stands for complementary), which amounts to 2% of total salary, which employees can decide themselves where to invest.

Today's ITP pension is based on a system whereby fixed benefits are paid out of current contributions. The employers wanted to make the pension scheme more flexible, more predictable and more adaptable to the modern labour market, and therefore wished to establish another way of calculating the pension. They wanted to change to a contribution-based system - ie workers' pensions are based on the contributions they themselves have made. SAF's final offer made in May 1999 thus provided that all salaried workers in the private sector were to have a contribution-based retirement pension, with a contribution of 3.8% of pay which they could decide for themselves where to invest. Contributions would start from the age of 25. Together with this contribution-based pension, a fixed-benefit pension would be paid as a supplement for those employees with a total annual income of between SEK 273,000 and SEK 728,000, also starting from the age of 25. In the negotiations, which intensified in the winter and spring of 1999, the parties came to an agreement on the idea of a new contribution-based system for the ITP. They could not, however, agree on the level of the contribution - PTK started by demanding 4.5%-5% and ended by seeking 4.1%, while SAF's final offer was 3.8%, having started at 3.5%.

Too wide a gap

PTK announced in a press release on 27 May 1999 that the negotiations had broken down because the distance between the two parties was too great. The parties had not been able to agree upon issues such as: the size of the contribution (see above); a definition of the salary on which the pension would be calculated (see below); the quality of local agreements establishing alternative pension arrangements; the the size of the sickness pension; and the possibility of being able to take 18 months parental leave without loss of future pension. The cartel, with its 28 unions, was quite concise and somewhat restrained in its commentary on the negotiations. However, the two major PTK trade unions which refused to accept SAF's offer of pension agreement, SIF and Ledarna, were quite open in their argumentation.

Mari-Ann Krantz, the chair of SIF, explained the decision not to accept the agreement to the union's 345,000 members, as follows: "The proposal affects different groups unevenly. It is not fair to women. SIF proposed that there should be a pension agreement that would at least be quite as good as the one we have today. The employers proposed changes to the worse for large groups - part-time workers, sick people, the workers that take care of sick children, workers on parental leave."

As well as some of the arguments already referred to, SIF and Ledarna's demands included the following:

  1. an exemption from paying cottributions for certain groups of workers, such as employees on parental leave. SIF and SAF disagreed about the length of the qualification period for entitlement to such exemptions;
  2. pensions for employees who leave their jobs. Today, pension contributions may be fully paid by the employers when workers aged 62 leave their jobs. SIF wanted to lower this age 61 years whereas the employers wanted to take away this possibility altogether;
  3. the quality of local supplementary pension agreements between companies and local trade unions must be guaranteed. An individual white-collar worker should have the right not to accept a pension arrangement established by local agreement and instead remain in the original ITP pension scheme. A special ITP board should approve such local agreements before they are implemented; and
  4. the salary on which the pension is based is currently the salary laid down in the relevant collective agreement. SAF wanted to change this method of calculation, using instead the employee's "real" gross pay. That would form a lower basis for estimating pension entitlement and would provide no pension rights for the periods when workers are on parental leave, sick leave or study leave, or taking care of sick children. The inclusions of all kinds of leave can be significant for the amount of the pension, even leave for union activities. This would be a change for the worse, according to the trade unions.

Commentary

The breakdown of the negotiations over a new ITP pension scheme seems final, and the parties do not believe that a restart is possible in the near future. Nothing will change for the employees in the private sector, as the current agreement dating from 1990 is still valid, and many trade unions are in fact quite satisfied with this for the time being. The losers are currently those employees who will go on being outside the system - workers aged between 25 and 28 (the current starting point for the ITP scheme). Other losing groups are: employees on parental leave who change jobs during their leave, who are not covered by the present agreement; workers in their 50s who lose their jobs; substitute workers and part-time workers working less than 16 hours a week. The latter group is growing.

A side issue linked to the outcome of the ITP negotiations is that new speculations have started around the future of the PTK cartel. Having lost a couple of big battles during the 1990s with its member trade unions, some critics foresee that PTK will have to deal with internal problems in order to avoid falling apart. (Annika Berg, Arbetslivsinstitutet)

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